Apple on Monday published in full the formal testimony that Chief Executive Tim Cook plans to give before the Permanent Subcommittee on Investigations in the U.S. Senate.

The full document is available at Apple's website in PDF form, and is dated May 21, 2013, for when Cook is scheduled to appear before the subcommittee. Apple's CEO has been called before the U.S. Senate to testify on his company's offshore tax practices.

The Senate hearing is a continuation of the panel's investigation into how the practice of keeping profits offshore affects U.S. taxes. Apple currently has more than $100 billion in cash stored overseas, and the company has made it clear it has no plans to repatriate those funds at current tax rates.

In the testimony published on Monday, Apple argued that the company already "pays an extraordinary amount in U.S. taxes." The company asserts that it is likely the largest corporate income tax payer in the U.S., having paid nearly $6 billion to the U.S. Treasury in fiscal 2012.

"These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

For Apple's current fiscal year, the company plans to pay more than $7 billion in taxes to the U.S. Treasury.

The testimony also argues that Apple does not use so-called "tax gimmicks." Specifically, Apple has said it does not:

Move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid U.S. tax.

Use revolving loans from foreign subsidiaries to fund its domestic operations.

Hold money on a Caribbean island

Have a bank account in the Cayman Islands.

The justification for Apple's "substantial foreign cash," as the company put it, is because the majority of its products are sold outside of the U.S. The iPhone maker's international operations accounted for 61 percent of its revenue last year, and increased to two-thirds of its revenue last quarter.

The company has also suggested that legislators enact an "objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy." In the eyes of Apple executives, the U.S. tax code is in need of "comprehensive" reform in order to promote growth and enable American corporations to remain competitive on the global landscape.

Apple also took the opportunity to highlight its job creation, noting tat the company estimates it has created or supported about 600,000 U.S. jobs, including 50,000 who are directly employed by Apple.

Since word got out that Cook has been called to Washington to testify, Apple has gone on the offensive to justify the amount of taxes that it pays. Cook himself did a series of interviews last week to argue that his company pays the U.S. government every dollar that it is owed. Many of the talking points used by Cook last week are covered in greater detail in the testimony published on Monday.

"I can tell you unequivocally, Apple does not funnel its domestic profits overseas," Cook said last week in an interview with Politico. "We don't do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I'd like to be really clear on that."

"These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

*********

"I can tell you unequivocally, Apple does not funnel its domestic profits overseas," Cook said last week in an interview with Politico. "We don't do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I'd like to be really clear on that."

Too lazy myself, but I'd love to see a breakdown of who pays what. It would seem there is an awful lot of non-contributing going on by the other thirty nine fourtieths

And can ANY politician, honestly-state similarly about their own tax dealings as Tim Cook's last quote?

Agreed. When its citizens pay a higher percentage you know you something is broken.

And just who do you think pays those corporate taxes in the end???? Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.

Any taxes levied on corporations result in higher priced products, period. They aren't simply going to reduce their profits by that much. It comes into the calculation of what they need to charge to survive. Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.

I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc. But to simply tax a corporation on its profits doesn't solve a thing.

Any taxes levied on corporations result in higher priced products, period. They aren't simply going to reduce their profits by that much. It comes into the calculation of what they need to charge to survive. Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.

I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc. But to simply tax a corporation on its profits doesn't solve a thing.

The income tax is a failure that is riddled with exceptions and favors for groups. Mind you, I'm against all taxes, but real reform could be made in the form of the FairTax.

I have said this before, as much as I would like to avoid paying any taxes and keep everything I make and earn. However, I realize tax $ most times bring lots of value to everyone, such as the highway system in this country. With that said, taxes do have place to ensure we all have things we would never otherwise have, do not believe me go to a country which do not have a means to fund capital project and see what it looks like there.

What needs to happen is the US needs to go to a flat tax everyone pays the same not matter what, no deduction and loop holes, total income before anything time X% is what you owe. This will get ride of the IRS, a bunch or highly paid lawyers and tax accounts , and the government will know exact how much they get and we all know what we pay, no need to filling a tax return either since you owe nothing after you pay and you get no refund since you should have never over paid in the first place.

If you want to see what how much Tax the US government would raise each year, just look at the GDP numbers and take X% of it. What is nice about this system is if the government wants more money the only way to get it is by making sure companies and people all make more money.

"These payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year," the testimony reads.

For Apple's current fiscal year, the company plans to pay more than $7 billion in taxes to the U.S. Treasury.

This is the usual route to mention how much is being paid but always misses out the point that it's still less than what they owe. They pay so much of Corporate Taxes because they make so much profit, that's how it works. It's a percentage system, you pay a percentage of what you make. You don't get to decide that a particular fixed amount is good enough - $6b would still sound high even if you made $1 trillion profit when you don't mention the $1 trillion. They've said openly that their effective tax rate is around 25%, which is less than the 35% expected and other people have worked it out to be less than 25% from what they paid. The billions in taxes don't matter because the profits are many more billions, it's the percentages that matter.

Their profits so far this year are about $13b and $9b so if it's $9b, $9b for the next quarters, they'll pay $7b out of $40b for 2013 = 17.5% tax. Their profit was $41.6b in 2012 so $6b paid is 14%.

Quote:

Originally Posted by AppleInsider

Hold money on a Caribbean island

Have a bank account in the Cayman Islands.

Keep going, there's more tax havens than that. They're going full diversionary on this one.

Quote:

Originally Posted by AppleInsider

The company has also suggested that legislators enact an "objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy." In the eyes of Apple executives, the U.S. tax code is in need of "comprehensive" reform in order to promote growth and enable American corporations to remain competitive on the global landscape.

The reform would have to be fair to other US companies though, which don't have the scale to manage international operations. The corporate tax rates would have to be lowered for every company, which isn't being paid enough as it is. This just puts more tax burden elsewhere. There's a list of tax rates here:

You can see the UK has much lower corporate tax rates but the sales tax is double. All that would happen if there was a reform is that companies will just push even further and pay half of a lower tax rate until it becomes as close to zero as possible.

When they talk about competition, what they mean is that if they stop avoiding taxes, other companies that still avoid them will be in a better position. Everybody has to follow the lowest common denominator - same reason why they move manufacturing to China. The only way to fix it is on a global level.

Quote:

Originally Posted by AppleInsider

Apple also took the opportunity to highlight its job creation, noting tat the company estimates it has created or supported about 600,000 U.S. jobs, including 50,000 who are directly employed by Apple.

And just who do you think pays those corporate taxes in the end???? Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.

Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.

Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.

Costs are most definitely factored into the ultimate price of goods and services. Taxes are a liability and they are part of the calculation.

And just who do you think pays those corporate taxes in the end???? Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.

Unfortunately, this is not an accurate statement. Taxes are derived from profit, and have nothing to do with the process of delivering products and services. Taxes are a cost associated with making a return on your business, not doing business as you are trying to imply.

Investors don't give a hoot about a company's pre-tax returns. All they care about, in valuing a business, is after-tax cash flows and after-tax returns.

Therefore, from an investor standpoint, corporate income taxes are indeed like a cost of doing business.

I love all the people manipulating the numbers to show their point of view. While you are at it why not include the percentage of people who pay no taxes just to be fair? And don't forget to include GE, whose head seems to be a close advisor to the president and whose company apparently paind no taxes.

Let's can singling out one company that actually pays a lot of taxes and admit the system is broke. The answer is simple, start demanding your representatives reform the tax code for all. And avove all stop being stupid and sending the same people back to DC time after time expecting different results.

When they talk about competition, what they mean is that if they stop avoiding taxes, other companies that still avoid them will be in a better position. Everybody has to follow the lowest common denominator - same reason why they move manufacturing to China. The only way to fix it is on a global level.
They put up a page on their website about this:

Sack people so money currently paid in wages can be paid to the government in tax, ignoring the fact that all those employees contribute income and other taxes and the money they spend supports other industries.

Definitely part of the issue.

Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.

Investors don't give a hoot about a company's pre-tax returns. All they care about, in valuing a business, is after-tax cash flows and after-tax returns.

For not caring about anything but after-tax returns, Apple investors sure make a big stink about criticizing management for not making a larger iPhone, a cheaper iPhone, a TV, a dividend and just about every other trivial day to day management issue. If stock price had only to do with after-tax returns Apple would be through the roof.

The senate just accused them of being thieves. It doesn't matter if true or not, this will stick in people minds and hurt sales in the only place in the world Apple still had a decent market share. I hope Tim Cook can repair this but I think Apple reputation just took a hell of a blow.

This is going to be all over the news and average Joe is not going to understand anything else other then Apple is making tax gimmicks.

And just who do you think pays those corporate taxes in the end???? Individuals pay ALL the taxes in this country as the tax burden is considered a cost of doing business and is reflected at the cash register.

Taking a step back, what exactly is wrong with this? It's not as if money paid in taxes just disappears. As sequestration recently proved, it goes to ensuring someone's in the control tower at your local airport, or someone is inspecting your meat for contamination, or someone is rebuilding your local crumbling bridge. The only people who don't want to pay taxes are those who want something for nothing.

Investors don't give a hoot about a company's pre-tax returns. All they care about, in valuing a business, is after-tax cash flows and after-tax returns.

Therefore, from an investor standpoint, corporate income taxes are indeed like a cost of doing business.

Not one that can be passed along to the consumer in many, perhaps most, cases, though. Consider Amazon's profits. Now, consider passing your corporate income tax along to the consumer as a price increase. Now consider how fast you are out of business.

The single greatest change in economic fortune in the US was post WWII when effective tax rates for corporations were in excess of 50%. Then again, CEO pay was 378% less and corportions came to Congress to raise tax rates and allow internal R&D increases and much more.

The country grew the Middle Class and then came the precursor to the Reagan years. By the time Reaganomics took hold the raping of the nation's wealth was in full force. Bush 1.0/2.0 just amplified it.

Any taxes levied on corporations result in higher priced products, period. They aren't simply going to reduce their profits by that much. It comes into the calculation of what they need to charge to survive. Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.

I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc. But to simply tax a corporation on its profits doesn't solve a thing.

That's the biggest con of all. If that were the case, the massive effective tax rates on the auto industry during the Truman, Eisenhower, Kennedy and Johnson period would have seen all commodities, luxury items raised out of sight.

Try something with real facts. What has changed is the effective tax rates these jokers pay and the incentives they have to off-shore their wealth. Cut those out and level the regulation playing field, to denying large consolidations in any industry and these ass clowns cash out and let other people take over the reigns.

If we are going to tax corporate income, we should head towards a much lower rate and broaden the base so everyone (with income) pays something. No industry should receive political favors as once that starts, we end up with the labyrinth code that we have now.

Politicians don't like flat/simple tax solutions because it removes them from giving favors and getting elected. But we should do just that.

Or we can move to a consumption tax and forget about taxing income altogether.

A flat tax can be made more progressive with higher exemptions or even multiple rates (which is still flatter than how we tax now).

Growth and fairness should be the goal.

Apple would repatriate those earnings back if given a tax holiday. That means the tax code is creating an undesirable behavior. Complex/high taxes tend to do that. We see this destructive behavior with many of our clients. Behavior that would diminish or disappear if the code was simplified.

The income tax is a failure that is riddled with exceptions and favors for groups. Mind you, I'm against all taxes, but real reform could be made in the form of the FairTax.

The "Fair Tax" is actually a VERY regressive tax that essentially rewards the wealthiest and hits the poor the hardest. I love these creative names for egregious things, like this "Fair Tax" (equal to a very unfair, across-the-board regressive flat tax), or the "Patriot Act" (which very unpatriotically impeded portions of our rights).

I'm not against "all taxes", in fact, I'd like to revert to the original Constitutional tax structure, as envisioned by the founding fathers… no income tax, most revenue pulled from commerce (huh, corporations… what do you know), real property, import/export and excise taxes.

Sales taxes are equally regressive, and hurt the poorest among us (e.g. when you NEED to spend all your income to survive, you end up paying a higher percent of your income in tax than someone who only needs to spend a small portion of their income. Get that?).

Our GDP was something in the neighborhood of $14 Trillion last year? If corporations contributed most of that, then why aren't they paying more than 10% of the tax burden?

Any taxes levied on corporations result in higher priced products, period. They aren't simply going to reduce their profits by that much. It comes into the calculation of what they need to charge to survive.

Someone needs to put the Koch Kool-aid down. Let's say I have a lemonade stand that makes $100, and I am taxed at an effective rate of 20%; thereby paying $20 to Uncle Sam and keeping $80 for myself. Now let's take that same scenario, but increase the effective rate to 35%. According to you, for me to make my same $80, I would need to raise my prices in a manner that would have me make $123 in profit. But this is where you argument falls apart!

If it was possible for my lemonade stand to simply raise prices to make $123 in profit, why wouldn't I have done so already? If I was a half-way decent lemonade stand owner, I would already have my product priced to be maximizing profits; regardless of my tax rate. You think corporations need the excuse of 'I need to compensate for my tax burden' to raise prices if it will yield higher profit? You seem to suggest that corporations are simply in business to make enough profit to meet a 'minimum floor', but that is not the case. I don't know of a single corporation whose sole objective isn't to MAXIMIZE profit.

They say the same thing: " GE CEO Jeff Immelt has said that the U.S. tax system is "old, complex and uncompetitive" and has had a "hugely negative impact" on the economy."

What rate do you have to bring it down to though in order for people to voluntarily pay more than they pay now? They're already not paying the rate so what difference does it make bringing it down?

Quote:

Originally Posted by hill60
Sack people so money currently paid in wages can be paid to the government in tax, ignoring the fact that all those employees contribute income and other taxes and the money they spend supports other industries.

Definitely part of the issue.

Wages are parts of the costs of running the company though so if you fire an employee, you not only lose any revenue generated by their employment (employees are generally supposed to pay for themselves and more by the work they do - http://royal.pingdom.com/2011/05/17/apple-staff-profit-per-head/ ), you then have that salary amount as taxable profit.

You would have to assume that employees are strictly an expense and that Apple could have generated $40b profit per year without them. Apple only has 50,000 main staff too. Getting rid of the store employees wouldn't even make a dent on their tax bill.

“Apple sought the Holy Grail of tax avoidance,” said Carl Levin, the Democrat who chairs the panel and will lead the hearing. “It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.”

The Senate report said Apple’s elaborate use of loopholes for international profits allowed it to save tax on $44bn in “otherwise taxable offshore income” in the past four years. But committee staff said there was no indication that Apple had done anything illegal in attempting to minimise its tax bill.

The company denied that Apple Operations International, an Irish unit, was a “shell company”, arguing that the entity had been set up to manage its “global flow of funds” and that its activities did not reduce Apple’s US taxes.

AOI generated profits of $30bn between 2009 and 2012 but did not file a tax return either in Ireland or the US in the past five years. Established in 1980, AOI holds board meetings in the US but has no physical presence or employees.

Apple also defended its practice of shifting part of the costs of its research and development to Ireland, even though it conducts “virtually all” of the work in the US – a technique that was attacked as a tax-avoidance scheme by the committee. The arrangement was “authorised by US law and complies with all US regulations”, Apple said.

Apple is the third big US technology group to face scrutiny from the Senate investigations panel after Microsoft and Hewlett-Packard."

The fact that they keep suggesting it's all legal is just going to annoy them more. If most of your R&D happens in the US, it might be legal to declare it in Ireland but only if it happened in Ireland. There's not really any way to check up on it though, which is what the companies bank on. A great number of things like property depreciation is very difficult to check, especially with a company like Apple's. Imagine an audit process where they have to fly out to Ireland and Luxembourg and check out every post box hidden away in the middle of nowhere. Big companies know they won't do this but to keep suggesting it's all legal and essentially blaming the law makers for letting them get away with it isn't right. Laws rely on people being ethical because some things just aren't easy to check up on.

The senate just accused them of being thieves. It doesn't matter if true or not, this will stick in people minds and hurt sales in the only place in the world Apple still had a decent market share. I hope Tim Cook can repair this but I think Apple reputation just took a hell of a blow.

This is going to be all over the news and average Joe is not going to understand anything else other then Apple is making tax gimmicks.

Congress has approval rates < 30% if I'm not mistaken. The average Joe couldn't name their representative.
Nothing but grandstanding.

Quote:

Originally Posted by tribalogical

The "Fair Tax" is actually a VERY regressive tax that essentially rewards the wealthiest and hits the poor the hardest. I love these creative names for egregious things, like this "Fair Tax" (equal to a very unfair, across-the-board regressive flat tax), or the "Patriot Act" (which very unpatriotically impeded portions of our rights).

I'm not against "all taxes", in fact, I'd like to revert to the original Constitutional tax structure, as envisioned by the founding fathers… no income tax, most revenue pulled from commerce (huh, corporations… what do you know), real property, import/export and excise taxes.

Sales taxes are equally regressive, and hurt the poorest among us (e.g. when you NEED to spend all your income to survive, you end up paying a higher percent of your income in tax than someone who only needs to spend a small portion of their income. Get that?).

Our GDP was something in the neighborhood of $14 Trillion last year? If corporations contributed most of that, then why aren't they paying more than 10% of the tax burden?

In many states, necessary items (unprepared food, clothes, paper goods, meds) are non-taxable. I think a flat-ish tax of some sort plus a consumption tax would be the way to go.

All those claiming that corporations don't need to pay anymore, please tell me why Exxon-Mobil paid only 13% in taxes in 2011. Well it is because our government chooses to return nearly 60% of the initial 35% back out of its own coffers. The largest most profitable company pays nothing near the listed 35% for a company of their bracket. US tax rates are supposedly astronomical compared to other countries - not when they end up paying 13% through loopholes and subsides. Their fare share is explicit, but tax brakes make many companies pay even less or near zero. End corporate welfare. We need to end the subsidy. Period.Edited by mmmdoughnuts - 5/20/13 at 6:38pm

Any taxes levied on corporations result in higher priced products, period. They aren't simply going to reduce their profits by that much. It comes into the calculation of what they need to charge to survive. Over tax the local corporations, and out of country corporations suddenly have a huge advantage and can undercut the local businesses.

I'm all for taxing anyone that generates income on an individual basis, including profits from capital gains, stocks, etc. But to simply tax a corporation on its profits doesn't solve a thing.

I disagree. Corporations price their products at the maximum price consumers will pay. Taxing a corporation will not increase the price of a product. It is already the maximum the consumer will pay.

Also, remember that one of the famous quotes from Mit Romney (for those outside the USA, he was the opposition Presidential candidate in the last election) was that "Corporations are people too my friend." So why should they get all the tax breaks?

That said, I think the reality is that we will need to go to VAT system as the current system is broken.